Freehold and Leasehold Reform

Debate between Fiona Bruce and Rachel Maclean

Wednesday 5th July 2023 Westminster Hall

[Rachel Maclean]

I thank the right hon. Gentleman for that point and he is absolutely right. He will hear about some of the things we are going to do to make it easier and fairer and not as expensive to challenge, and I shall to set out some more detail now.

When leaseholders challenge their landlord, we know, as the right hon. Gentleman said, that they are sometimes subject to unjustified legal costs, and we are committed to ensuring that leaseholders are not subject to them and, where appropriate, can claim the legal costs from the landlord, which certainly seems fairer than the current situation. Currently, if set out in the lease, leaseholders might be liable to pay their landlord’s legal costs regardless of the outcome of a dispute—even if they win the case. That is a classic case of heads you win, tails you lose. Also, the circumstances in which a leaseholder can claim their own legal costs from a landlord are currently very limited. That may lead to leaseholders facing higher bills than the charges being challenged in the first place and can deter leaseholders from taking their concerns to the courts or property tribunal, as the right hon. Gentleman says.

Whether on freehold estates or in leasehold or commonhold blocks, we are committed to raising professionalism and standards among all property agents, protecting consumers while defending the reputation of good agents from the actions of rogue operatives. I know that my hon. Friend the Member for Dartford has been working on that issue in his constituency, and I can assure him that I will continue to work with industry—I have regular dialogue with it—on improving best practice across the sector, including on codes of practice for property owners.

Ground rent was particularly highlighted by the hon. Member for Ellesmere Port and Neston, and we are concerned about the escalating costs of ground rents for leaseholders who still pay them. As many will know, we asked the Competition and Markets Authority to investigate the potential mis-selling of homes and unfair terms in the sector and it has been successful in securing commitments benefiting over 20,000 leaseholders, including removing doubling ground rents.

Both enfranchisement and the right to manage help give leaseholders greater control. In most cases managing agents would still be used, but they would be accountable to leaseholders directly, rather than a third-party landlord, ensuring that interests are aligned. For those who want greater control over their homes, many leaseholders find the process for extending their lease or buying their freehold prohibitively expensive, complex or lacking in transparency and we equally understand that many right-to-manage applications fail on technicalities attributed to overly detailed procedure, which is why we asked the Law Commission to look into that. It has since published reports on enfranchisement, valuation and the right to manage.

To reduce the cost of enfranchisement, we are committed to tackling the problems with these existing arrangements at their root. We will abolish marriage value and cap ground rents in enfranchisement calculations, so that leaseholders who currently pay onerous ground rents do not also have to pay an onerous premium to buy their freehold. These changes will result in substantial savings for leaseholders, particularly those with less than 80 years left on their lease. These changes will also make sure that sufficient compensation is paid to landlords to reflect their legitimate property interests.

To make the process simpler and more transparent, we will introduce an online calculator to help leaseholders understand what they will pay to extend their lease or buy it out, and the Government are committed to reforms to improve access to the existing right to manage, whereby leaseholders may take over the management of their block without having to buy the freehold. We want to make the process of exercising the right to manage simpler, quicker and more flexible, and make the operation of it more effective. To that end, we are carefully considering the detail of the Law Commission’s recommendations.

To give homeowners greater control, we want to make sure that the benefits of freehold ownership are extended as far as possible. We remain committed to banning the sale of new leasehold houses so that, where possible, all new houses are provided as freehold from the outset. For flatted developments, we want to reinvigorate commonhold so that it can become a mainstream and widespread freehold alternative to leasehold for both new and existing flats. Again, we are reviewing the Law Commission’s detailed recommendations, which propose legal fixes that will make commonhold a desirable alternative in more and more settings. We have established the Commonhold Council, made up of consumer and housing industry experts, to advise the Government on how to prepare both consumers and the market for the widespread use of commonhold. Furthermore, the Leasehold Reform (Ground Rent) Act 2022 is levelling the playing field for future commonholds as well as benefiting new homeowners. It removes ground rents from new leaseholds, and the associated financial incentives for developers to build leasehold over commonhold, where ground rents were never permitted.

I thank my hon. Friend the Member for Dartford for prompting such a vital debate and everybody for their contributions, and I am pleased that we have been able to discuss these issues properly. We plan to introduce reforms in the King’s Speech, which will take place in the autumn, so the reforms should take place within this Parliament. I recognise that every single Member would like a more detailed timeline, but I will continue to have these discussions, as Members have implored, both with my colleagues in the Department and with those across other channels who are responsible for tabling legislation.

[Fiona Bruce]

Would the Minister be willing to have a discussion with the residents I have referred to in more than one debate? I would be very grateful.

[Rachel Maclean]

Of course. I would be absolutely delighted to meet my hon. Friend’s residents. I implore her to contact my office so that we can arrange that as soon as we can.

I hope this debate has demonstrated to the House, leaseholders and homeowners on freehold estates across the country our continued commitment to reform and to making things better. I am grateful to Members across the House, campaign groups and members of the public for highlighting the difficulties that homeowners face. As I am sure Members can appreciate, this is a significant undertaking, and I look forward to coming to the House with more detail as soon as I am able to.

Freehold Management: Service Charges

Debate between Fiona Bruce and Rachel Maclean

Thursday 20th April 2023 Commons Chamber

[The Minister of State, Department for Levelling Up, Housing and Communities (Rachel Maclean)]

It is a great pleasure and privilege to respond to my hon. Friends the Members for North East Bedfordshire (Richard Fuller) and for Congleton (Fiona Bruce) on this vital matter.

I pay huge tribute to hon. Friend the Member for North East Bedfordshire for his persistence on this particular issue and for his convening power in gathering 30 of our colleagues, which is no mean feat, regardless of the issue. He has made an incredibly compelling speech, every word of which the Government—and certainly the Department for Levelling Up—agree with, as I will set out in the time that remains. I also pay tribute to the individuals and groups he has worked with and about whom he has taken time to speak to me. He has explained to me the impact on the lives of his constituents, mentioned Tom Middleton of the residents’ association, and set out the excellent work that Councillor Jim Weir and many other councillors in the area have done. When my hon. Friend told me the story of the seven lampposts, I found it absolutely appalling and shocking that that kind of abusive practice can go on in this day and age. It has to stop, and we are absolutely committed to putting into practice the actions that will bring a stop to it.

I do not need to deliver most of my speech because my hon. Friend has done an excellent job of setting out the landscape of the problem and what needs to happen, so I will skip straight to what we will do to fix this. We know that legislation needs to be introduced. He challenged me on the timetable for that, and I will respond. We are committed to introducing legislation to plug this gap. We intend to create a new statutory regime for freehold homeowners based on the rights that leaseholders have, which would ensure that estate management charges must be reasonably incurred, that services provided are of an acceptable standard and that there is a right to challenge the reasonableness of charges at the property tribunal. We need to end this fleecehold situation where homeowners who thought they had bought a home to live in—their own piece of property, with their own front door—are subject to abuse and find these charges escalating out of all proportion to the services provided.

We will also give a right to change the provider of maintenance services by applying to the tribunal for the appointment of a manager. That can be useful if the homeowner is dissatisfied with the service they are receiving and there is significant failure by the estate management provider to meet its obligations. We will take action to tackle these unreasonable costs and the lack of performance and service delivery by these companies. We will go further in time and will consider how to introduce a right to manage for freehold home- owners once we have considered the complexities of the Law Commission’s report.

I turn to the questions that my hon. Friend asked. He asked whether I would meet him and other concerned colleagues to discuss the detail of these issues. I am aware that we only have a short time today, and he has raised many complex issues. I am happy to meet him to discuss this further. That is important, because this is a big change, and we are tackling many areas of law.

My hon. Friend rightly challenged me on the numerous commitments made by Ministers at the Dispatch Box to ensure that these measures are introduced. Clearly, it is beyond my pay grade to pre-empt what the King’s Speech will contain, but my hon. Friend rightly pointed to not only the letter from the Prime Minister but repeated assurances from myself, which I will repeat today, and from the Secretary of State for Levelling Up, Housing and Communities that this issue is top of the list of priorities for our Department. We take it very seriously, and we fully intend to bring forward legislation to implement the changes as soon as parliamentary time allows. That is the plan, and we remain committed to it.

My hon. Friend asked me whether there will be any dilution of the current commitments. The straight answer is no. We remain committed to addressing all the imbalance facing freehold homeowners, and we will legislate so that freehold homeowners have the right to challenge the reasonableness of charges and to go to the tribunal to appoint a new management company.

My hon. Friend asked me when this legislation will be introduced. Of course, we always want to bring in changes that will make a difference to people when this is having an impact on their household budgets. We all share the desire to bring legislation in as soon as possible. As soon as the Bill has completed its passage through Parliament, we will strain every sinew to get these changes on to the statute book, so that people can use them—that is what we all want to see.

My hon. Friend referenced the CMA market study into house building. He will be reassured to know that this study does not in any way dilute the Government’s commitments; in fact, it complements them, and it might suggest other actions for the Government. As he said, there are many aspects of this situation and many problems that we need to fix.

My hon. Friend asked me whether we can write to companies reminding them of their obligations and calling for accountability and transparency. They need to know that change is coming, and I want to reiterate that today from the Dispatch Box. As the Minister responsible for this, I receive many pieces of correspondence from colleagues across the House and people across the country. The changes proposed by the Government are much needed. These estate management companies should be on notice, and I repeat that today. The Government have been very clear that all charges should be reasonable and clearly communicated, and we are wholly committed to strengthening freeholders’ rights on these estates.

[Fiona Bruce]

I am very encouraged by what the Minister is saying. Actually, some charges, rather than being reasonable, should be not there at all. Let us take play areas as an example. Will the Minister consider whether local authorities should take over a play area if, for example, it has been created as a result of an agreement with the developer? Such play areas are used not just by the residents whose properties the green area fronts but by anyone in the local area, freely. Will the Minister discuss with local authorities and the Local Government Association how to prevent situations where residents are completely unfairly burdened, and ensure that local services are taken over by local authorities where they should be?

[Rachel Maclean]

I thank my hon. Friend for raising that point, which is one that I am familiar with from my constituency. It is an issue that I am sure we have all faced in one form or another, and it causes considerable frustration, annoyance and anger among local residents who have bought those properties and expect to have those facilities there. They have paid good money for the houses that they have moved into.

I will certainly discuss that issue with my hon. Friend further; there are a number of legal frameworks that we may be able to use to assist with that. I will commit to writing to her with a bit more detail on that point, because I fear that I will not be able to do it justice in the Chamber, but we will introduce secondary legislation on the back of the Bill that we intend to introduce that will bring a considerable advance in the amount of clarity that already exists pertaining to these matters and many others.

To revert to my hon. Friend the Member for North East Bedfordshire and his call for us to write to all the management companies, much as that would appear to be a sensible approach, unfortunately, it would prove rather more difficult in practice. It is very difficult to track down where all these companies are, their addresses, and who actually runs them. What I can certainly commit to do, though, is put information on gov.uk making it very clear to those companies what the obligations on them should be.

With that, Mr Deputy Speaker, I will bring my remarks to a close. I finish by thanking again my hon. Friend the Member for North East Bedfordshire for all the work he has done with his colleagues; my hon. Friend the Member for Congleton (Fiona Bruce) for her really useful contributions; and my hon. Friend the Member for Wyre Forest (Mark Garnier), my neighbour in Worcestershire, who has also contributed to the research. I reiterate that it should always be clear to potential homebuyers what the arrangements are, but we know that very often, it is not; that is the root cause of some of the problems that we have faced. We think it is pure justice that homeowners must have effective ways to get things put right when they have a problem with their housing. That is why we remain wholeheartedly committed to legislating, when parliamentary time allows, to empower those freehold homeowners so that they can better hold the estate management company to account. I thank the whole House for the time it has taken to consider these important matters.

Question put and agreed to.